Roseville Couple Arrested for Alleged Loan Modification and Foreclosure Rescue Scheme

October 2, 2012

The Federal Bureau of Investigation (FBI) on October 1, 2012 released the following:

“SACRAMENTO, CA— Martin Wayne Flanders, 48, and Ligia Sandoval Spafford, 46, of Roseville, were arrested today on a complaint charging them with orchestrating a fraud scheme targeting distressed homeowners, United States Attorney Benjamin B. Wagner announced. Flanders was also charged with conspiracy to commit bankruptcy fraud for filing sham bankruptcy petitions as part of the fraud scheme. The complaint was filed in Sacramento on September 28, 2012, and unsealed after the arrest today. Flanders and Sandoval are expected to make their initial appearances in court today in Sacramento at 2:00 p.m.

According to court documents, Flanders charged clients advance fees in exchange for a number of financial services, including loan modifications, mortgage loan audits, credit repair, debt relief, bankruptcy filings, and a program to sell homes to “investors” with a rent-to-own option. Flanders and Sandoval marketed these services to economically distressed homeowners with particular emphasis on those who were Spanish-speakers. During a radio program aired twice weekly by a Bay Area Spanish-language Christian radio station, Radio Luz, Sandoval promoted the services she and Flanders offered. Flanders also advertised on a Spanish-language television station, Univision, and in Spanish-language magazines. About 98 percent of Flanders’s and Sandoval’s clients were of Hispanic descent, some of whom spoke little to no English. Sandoval speaks Spanish; Flanders does not.

The investigation to date has identified 25 to 30 individuals who paid for services and did not receive them for a total loss of approximately $120,000. Some homeowners who were not able to obtain relief were foreclosed upon by their lenders.

This case is the product of an extensive investigation by the Federal Bureau of Investigation. Assistant United States Attorney Todd A. Pickles is prosecuting the case.

If convicted, they face a sentence of up to 20 years in prison on the mail fraud charges, and Flanders faces up to five years in prison for bankruptcy fraud. The actual sentences, if convicted, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

The allegations in the indictment are mere accusations, and all persons are presumed innocent until and unless proven guilty beyond a reasonable doubt in a court of law.”

Federal Mail Fraud Crimes – 18 U.S.C. § 1341

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.



Federal bank fraud cases up in north Alabama

May 14, 2012

Blog.al.com on May 13, 2012 released the following:

By Kent Faulk

“BIRMINGHAM, Alabama — Eight men and women have stood before federal judges in Birmingham the past few weeks on bank fraud charges.

Among them:

• A Mountain Brook man sentenced to four years in prison for embezzling nearly $1.2 million from his former employer by writing checks to himself on the company’s bank account.
• A former Union State Bank branch employee in Trussville sentenced to a month in prison for theft of about $25,000 from the teller drawer and bank vault in 2007 and 2008.
• A former Regions Bank telebanking representative who pleaded guilty to taking $190,000 from a customer’s account during a two-year period, and directing money from the account to pay her bills after she had left her job.

The number of cases being prosecuted for bank fraud by the U.S. Attorneys Office for the Northern District of Alabama has steadily increased in recent years. In 2011 federal prosecutors charged bank fraud in 22 cases, up from 16 cases in 2010, 15 cases in 2009 and 11 cases in 2008. So far, eight cases have been charged this year through May 4.

Some cases include more than one defendant and other charges are also included in some cases.

“I guess it’s a sign of the times,” said James Kendrick, a Birmingham attorney who has represented clients charged with bank fraud.

Rod Pittman, director of corporate security for BBVA Compass, stated in a written response to questions from The Birmingham News that recently they have “seen a significant increase in fraud attempts, the majority of which can be attributed to the economy and technology.”

“In this economy many people are unemployed and more likely to be in a desperate financial situation. This sometimes results in attempted fraud,” Pittman wrote.

Some of those charged with bank fraud in the past year have been bank employees working alone or with help from outside the bank.

Bank employees may be thinking they will pay it back, Kendrick said. “Before you know it, you’ve got more than you can pay,” he said.

Bank fraud isn’t always an inside job.

“The crime of bank fraud is broader than a bank employee stealing money from the bank,” said Peggy Sanford, spokeswoman for the U.S. Attorneys Office in Birmingham.

“The statute allows that if someone makes misrepresentations to a bank in order to get other people’s money held in that bank, then bank fraud has occurred.”

Some attorneys and bank security officials attribute the increase in people being charged by federal prosecutors to a more aggressive stance by the Justice Department on financial fraud.

In many cases the dollar amount is the difference between whether federal prosecutors or state prosecutors will handle a case, said Larry Meredith, director of corporate security for Birmingham-based Cadence Bank.

The U.S. Attorneys Office has been active when it comes to presentations to the banks on various issues, including the importance of the timely sharing of information on possible criminal activity, said Bill Burch, director of corporate security for Regions Bank. “The communication between prosecutors, federal law enforcement offices (and banks) has been enhanced dramatically,” he said.

Sanford said the push by U.S. Attorney Joyce White Vance’s office in north Alabama is consistent with the U.S. Justice Department’s efforts to make financial fraud a top priority and President Barack Obama’s creation of the Financial Fraud Enforcement Task Force.

Banks don’t generally share how much they lose to fraud schemes, but as an industry it’s in the billions of dollars each year, according to some estimates.

But it’s a lot more than the old fashioned way of illegally taking money from a bank.

“The losses are greater than if you had just walked in an robbed the bank with a note,” Meredith said.

While the money lost in a bank robbery may only be a few thousand dollars, the losses from both internal and external fraud is often tens of thousands of dollars and taken over a period of months and years.

The punishment for bank fraud varies. The range of sentences was one month to four years for those charged and sentenced so far in the 2011 cases on just the bank fraud charges. A few had longer sentences because they also had other charges besides bank fraud.

One person also was acquitted and couple had their bank fraud charge dismissed as part of plea deals at sentencing.

Wellington Monroe Phillips II was sentenced to four years in prison for bank fraud for embezzling nearly $1.2 million from a Birmingham-based natural gas supplier.

Twice a month Phillips issued himself an unauthorized check from the corporate bank account held at First Commercial Bank. He would forge the name of the company’s owner on each check and submit them for payment.

Bank corporate security officers say banks have increased security as new fraud schemes surface to tap into bank accounts.

Dan Bailey, chief executive of the Alabama Bankers Association, said that bank customers should take it upon themselves to help secure their accounts, including checking their accounts daily. “Catch it before it goes too far,” he said.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Former Loan Officer Sergio Martinez Indicted by a Federal Grand Jury with Bank Fraud, False Statement to Influence a Financial Institution, Wire Fraud, and Conspiracy to Commit Wire Fraud in an Alleged Mortgage Fraud Scheme

May 8, 2012

The Federal Bureau of Investigation (FBI) on May 7, 2012 released the following:

“Former Loan Officer and Resident of Tucson Indicted for Mortgage Fraud Scheme

TUCSON— Last week, a five-count indictment was unsealed. The indictment, which was returned by a federal grand jury on March 29, 2012, charges former loan officer Sergio Martinez, 35, of Tucson, with bank fraud, false statement to influence a financial institution, wire fraud, and conspiracy to commit wire fraud. Martinez was arrested on the indictment last month in Buffalo, New York.

The indictment alleges that Martinez participated in a scheme to defraud a financial institution in order to obtain financing. Although Martinez was not the listed loan applicant, he allegedly caused to be submitted a loan application that contained material false statements including: (1) a false representation that the loan applicant was self-employed; (2) a falsely inflated income; and (3) a false representation that no part of the down payment was borrowed. The indictment further alleges that another document submitted to the lender falsely represented that the borrower would provide $359,982.38 in cash to close the deal when, in fact, the borrower and Martinez received a separate loan that was used to provide most of that cash. These documents were allegedly provided to obtain $1.4 million in loans to purchase a $1.75 million home. After the financing was used to purchase the property, the home went into foreclosure due to lack of payments. The foreclosure resulted in a significant loss to the lender.

An indictment is simply the method by which a person is charged with criminal activity and raises no inference of guilt. An individual is presumed innocent until competent evidence is presented to a jury that establishes guilt beyond a reasonable doubt.

A conviction for bank fraud, false statement to influence a financial institution, wire fraud, and conspiracy to commit wire fraud each carries a maximum penalty of 30 years in prison, a $1,000,000 fine, or both. In determining the actual sentence, Judge Collins will consult the U.S. Sentencing Guidelines, which provide appropriate sentencing ranges. Judge Collins, however, is not bound by those guidelines in determining a sentence.

The investigation preceding the indictment was conducted by the Internal Revenue Servic-Criminal Investigation Division and the Federal Bureau of Investigation. The prosecution is being handled by the U.S. Attorney’s Office, District of Arizona, Tucson.”

US v Sergio Martinez – Federal Criminal Indictment

18 U.S.C. § 1014

18 U.S.C. § 1343

18 U.S.C. § 1344

18 U.S.C. § 1349

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Executive Indicted for Allegedly Defrauding Employee Benefit Plans of Public Housing Agencies Nationwide of $8.6 Million

May 3, 2012

The Federal Bureau of Investigation (FBI) on May 3, 2012 released the following:

“CHICAGO— A former executive and part owner of a suburban company that administered employee pension plans and group life insurance programs for public housing authorities across the country was indicted for allegedly defrauding the agencies and their employees of more than $8.6 million. The defendant, Richard P. Zachmann, was charged with 12 counts of wire fraud in an indictment returned yesterday by a federal grand jury, Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation, announced today.

Zachmann, 60, of Aurora, will be arraigned at a later date in U.S. District Court. He was vice president of Life Associates, Inc., and between 2001 and 2008 controlled operations of the business, which he and his wife owned. Life Associates, which had offices in far west suburban Sandwich and later in Sugar Grove, administered employee pension plans and group life insurance programs for more than 100 public housing authorities in 21 states, with thousands of employee beneficiaries. Chicago area clients included the public housing agencies in Du Page County, Elgin, North Chicago, and East Chicago, Indiana. The Chicago Housing Authority was not a client of Life Associates.

Between 2002 and January 2009, Zachmann allegedly did not disclose to, and concealed from, the housing authorities and the beneficiaries that their pension plans and group life insurance programs had received valuable proceeds when the financial company that serviced the plans converted from a mutual holding company, owned by its policyholders, to a publicly traded company through a process known as “demutualization.” Zachmann allegedly converted approximately $8,628,666 in demutualization proceeds to his and his wife’s personal benefit, to the benefit of Life Associates, and to the benefit of other non-related businesses that Zachmann at least partially owned. Zachmann knew that these proceeds were to be used solely for the benefit of the housing authority benefit plans and their beneficiaries, the charges allege. According to the indictment, Life Associates offered its housing agency clients access to a group life insurance program through Principal Financial Group (formerly known as Principal Mutual Holding Company), based in Des Moines, Iowa, that provided investment management services to the housing authorities. In May 2001, Principal converted from a company owned by its policyholders to a publicly traded company. As a result of the demutualization process, Principal’s customers and policyholders, including the housing authorities, were entitled to share the distributions of Principal’s value at the time of its initial public offering in the form of cash, policy credits and Principal’s stock.

In February 2002, Zachmann caused account credits to the housing authorities’ pension plans to be converted into approximately $6,250,967 in cash. At the same time, he allegedly caused Principal common stock shares credited to the group life insurance plan to be sold and converted into approximately $1,363,458 in cash, which grew with interest over time. In about July 2002, Zachmann caused Principal to debit the demutualization proceeds on roughly a monthly basis, retroactive to April 2002, to pay increased fees to Life Associates, and he provided Principal with false documents purporting to prove that the housing authorities knew about the higher fees, as well as the existence of the demutualization proceeds, the indictment charges.

Between July 2002 and May 2007, Zachmann allegedly caused Principal to make monthly payments to Life Associates totaling nearly all of pension plan demutualization proceeds, which had grown to approximately $6,861,666. As these proceeds were nearing depletion, between February 2007 and January 2009, Zachmann allegedly caused Life Associates to receive payment of life insurance demutualization proceeds totaling approximately $1,767,000. The indictment seeks forfeiture of at least $8,628,666 in alleged proceeds of the fraud scheme.

Each count of wire fraud carries a maximum penalty 20 years in prison, and a $250,000 fine of $250,000, and restitution is mandatory. The court may also impose a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The government is being represented by Assistant U.S. Attorney Andrew S. Boutros.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Mohammad Nawaz Khan, Iquila Begum Khan, Mohammad Shahbaz Khan, Gurdev Kaur Johl, and Kewal Singh Arrested by the FBI in an Alleged $5 Million Fraud Scheme

May 2, 2012

The Federal Bureau of Investigation (FBI) on May 1, 2012 released the following:

“Five Arrested in Sutter and Yuba Counties for $5 Million Fraud Scheme

SACRAMENTO, CA— United States Attorney Benjamin B. Wagner announced that five individuals have been arrested in Sutter and Yuba Counties for their participation in a long-running unemployment and disability fraud scheme.

Mohammad Nawaz Khan, 56, and Iqila Begum Khan, 31, both of Live Oak; and Mohammad Shahbaz Khan, 56, Gurdev Kaur Johl, 67, and Kewal Singh, 74, all of Yuba City, were arrested today. They are scheduled to appear before U.S. Magistrate Judge Kendall J. Newman at 2:00 p.m. today. Also charged in the complaint, but not arrested is Mohammad Adnan Khan, 32, of Live Oak.

According to the criminal complaint, the defendants began forming a series of companies with the Employment Development Department in 1989. The most recent company was formed in 2011. All of these companies purported to be farm labor contractors that provided labor to harvest various agricultural crops in Sutter and Yuba Counties.

However, undercover operations by a number of confidential sources showed that these businesses were in fact selling wages to hundreds of individuals in Northern California. The defendants would charge an individual approximately $250 for $1,000 in wages. The purchaser, who never performed any work for the defendants’ companies, would then claim to be laid off and file for unemployment benefits, disability benefits, or both.

When interviewed by EDD, the individuals who claimed to have worked for these companies would oftentimes not know the location where they worked, or the name of their supervisor. Sometimes they would report earnings that greatly exceeded the agricultural norms for the area. Many of the employees reported by these companies were between 50 and 70 years old and claimed that their duties consisted of picking peaches and harvesting walnuts, physically demanding work.

According to the criminal complaint, in order to further the fraud, the defendants used the name “Mohammed Khan,” used each other’s business addresses, repeatedly hired and laid off each other, and continually changed the names of the businesses.

The investigation is ongoing in order to determine the full extent of the fraud. A preliminary analysis of EDD claim records has found more than 2,000 potentially fraudulent unemployment and disability claims and more than $5 million lost.

This case is the product of an extensive investigation by the Federal Bureau of Investigation, the United States Department of Labor, Office of Inspector General, and the Investigation Division of the California Employment Development Department. Assistant United States Attorney Jared C. Dolan is prosecuting the case.

If convicted, the defendants face a maximum statutory penalty of 20 years in prison. The actual sentence, however, will be determined after conviction at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables The charges are only allegations. Each of the defendants listed is presumed innocent, unless and until proven guilty.”

US v. Khan et al – Federal Criminal Complaint

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Ex-CFO at Taylor Bean and Whitaker Pleads Guilty in a $3B Fraud Scheme

March 21, 2012

Boston Globe March 20, 2012 released the following:

“Ex-exec at Taylor Bean pleads guilty in $3B fraud

By Matthew Barakat
AP Business Writer

ALEXANDRIA, Va.—The chief financial officer of what had been one of the nation’s largest private mortgage companies pleaded guilty to charges Tuesday for his role in a $3 billion fraud scheme.

Delton de Armas, 41, of Carrollton, Tex., was CFO of Florida-based Taylor Bean and Whitaker up until its collapse in 2009.

On Tuesday de Armas became the eighth person convicted in one of the biggest fraud schemes to emerge from the nation’s housing crisis. The other seven, including Taylor Bean founder and chairman Lee Farkas, were sentenced last year, with Farkas receiving a 30-year term.

De Armas faces up to 10 years after pleading in U.S. District Court to conspiracy to commit fraud and making false statements.

The company hid billions of dollars in debts with phony accounting and by double- and triple-selling mortgages it held to various financial institutions.

Taylor Bean’s collapse threw its 2,000 employees out of work and also helped bring down Alabama-based Colonial Bank, the sixth-largest bank failure in U.S. history.

At Tuesday’s plea hearing, de Armas first tried to tell the judge that he only became aware of the fraud at the very end of the scheme, but under questioning from U.S. District Judge Leonie Brinkema, he acknowledged that he knowingly signed off on misleading financial statements back to 2006.

Between 2006 and 2009, the “hole” in Taylor Bean’s books for a subsidiary called Ocala Funding grew from $150 million to more than $1 billion.

Regarding the company’s financial statements, de Armas told the judge: “Hindsight has the benefit of clarity. … I regret that I didn’t speak up more.”

He declined comment after Tuesday’s hearing.

Neil MacBride, U.S. Attorney for the Eastern District of Virginia, whose office prosecuted the case, said de Armas could have put a stop to the fraud the moment he discovered it.

“Instead, the hole in Ocala Funding grew to $1.5 billion on his watch, and as it grew, so did his lies to investors and the government,” MacBride added.

While the housing crisis apparently peaked a couple of years ago, prosecutors continue to bring a large number of mortgage fraud cases, with the Taylor Bean case among the most prominent. The FBI says that nearly 1,100 individuals were convicted of mortgage fraud in fiscal 2011 alone.

“The actions of Mr. de Armas and his co-conspirators contributed to the financial crisis and led to the collapse of one of the country’s largest commercial banks. The FBI and our partners remain vigilant in investigating such fraudulent activity in our banking and mortgage industries,” said James McJunkin, assistant director in charge of the FBI’s Washington Field Office.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Federal Indictment

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.